BI & DW Fundamentals: What is Business Intelligence?

Last Updated: 17 July 2015

Concept of business intelligence is simple one but not always well understood.

Take an example of a local retail store. In few months time, the store owner notices reduction in sales and reasons that customers are buying in another similar store opened nearby which offers more competitive price.

He then decides to reduce some of the goods price, but still the sales volume reduced. After consulting some of his customers, he understood that another store has offered festival offer on range of good.

How can you keep your store running in such a difficult competition?

With ever increasing competency, a corner store in your town may not sustain the business for long. It requires a strategy to grow and to be competitive. Business intelligence system helps to build such strategy for the retail store. There is a rich crop of data to be harvested from each customer visit to the store - customer age, sex, social group; spending patterns, seasonal information and many more.

In olden days, there was no system that could give you detailed analysis of such information and of course with a limited competition it may not be necessary for a local retail store. But think of this scenario for global companies such as Wal-mart, Amazon, Target, and Costco. With billions of sales at stake, building a business intelligence system becomes very critical.

Hold on! We haven't yet defined business intelligence.

The term business intelligence often becomes messy because of an array of disciplines involved. We need to gather data, sort it, store it and make sure it is available when needed. Then we also need to do required manipulation and interpretation. These are not simple tasks - to achieve this one needs different disciplines within the technology wing of the company, and participation of finance, purchase, sales departments to produce required details.

So, what is business intelligence definition?

In simple terms, business Intelligence refers to a set of methods and techniques that are used by organizations for tactical and strategic decision making.

A formal definition of BI would be, "Business intelligence (BI) is a set of theories, methodologies, architectures, and technologies that transform raw data into meaningful and useful information for business analysis purposes".

Business intelligence history(sourced from Wikipedia)

1865 - The term "Business Intelligence" was originally coined by Richard Millar Devens’ in the ‘Cyclopædia of Commercial and Business Anecdotes’. Devens used the term to describe how the banker Sir Henry Furnese, gained profit by receiving and acting upon information about his environment, prior to his competitors.

1958 - In an article, IBM researcher Hans Peter Luhn used the term business intelligence

1989 - Howard Dresner proposed "business intelligence" as an umbrella term to describe "concepts and methods to improve business decision making by using fact-based support systems."

Business intelligence today

Use of business Intelligence as a term and as a technology is rapidly evolved in last two decades. However, still the earlier definition of business intelligence as an umbrella term is maintained. The revolutionary aspect of business intelligence today as we see is self service systems where the business users can process, access, and analyze the information in a click of a button.

In general, a business intelligence system comprises of multiple disciplines - such as Data Mining, Data Warehousing, Reporting, Analytics, Data Marts, OLAP, Dashboards, Scorecards, KPI - to help enterprise users make better business decisions.

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I am Business Intelligence & Analytic professional, working for a reputed MNC in India. This blog contains only my personal views, thoughts and opinions. It is not endorsed by my employer nor does it constitute official communication of any sort. Read more - BusiTelCeLinkedin page | Contact me